Medicare: Battleground of the Bogus Deficit Debate

Medicare: Battleground of the Bogus Deficit Debate

The Challenge

The U.S. has a large budget deficit because the government fought two wars without paying for them; conservatives slashed taxes several times; and then the financial crisis, fueled by deregulated bank gambling, threw millions of middle-class taxpayers onto the unemployment rolls.

And now self-proclaimed “deficit hawks” have a solution: cut Medicare benefits for the most vulnerable seniors (and tomorrow’s retirees). And many (including Presidential candidate Mitt Romney) want to drastically change Medicare – by giving seniors a fixed amount of money to buy insurance on the private market.

Almost 50 years ago Medicare was created to guarantee seniors affordable health care. It has been an amazing success story, assuring that more than 50 million older Americans and people with disabilities have health care – and are not pushed into poverty by the costs of illness and hospitalization. Now, conservatives are vowing to replace Medicare with a voucher system that would force older people to try to buy insurance from a welter of private insurance companies whose failure to serve seniors made Medicare necessary in the first place.

If they are successful, seniors would lose the comprehensive national coverage and financial protection that Medicare offers them no matter which doctors and hospitals they use, anywhere in the country. The Republican plan would force them to pay more for health care seniors now get from Medicare – and jeopardize their access to care.

Despite its success, Medicare has been targeted by conservatives who don’t want to take on the real drivers of growing deficits. Instead, they see an opportunity to bolster the profits of private insurance companies, even if this means ignoring the needs of Medicare enrollees. And, for all their talk about deficits, conservatives don’t want to make investments that would put Americans to work and bring down the deficit through an expanding tax base.

Calling Medicare an out-of-control “entitlement” whose costs are rising dramatically and unsustainably, they claim we just can’t afford Medicare as we know it any more. They ignore the experience of history that demonstrates private insurance is more costly. They are really making the case for a giant step backward as a nation and as a civilized community. And it would avoid the real causes of deficits.

Make the Case

Medicare enjoys almost universal support. Most working Americans have seen how Medicare takes a huge load of worry off their parents and grandparents because at 65 this national, comprehensive program offers health and financial security.

But conservatives first tell us we can no longer afford it; we need to privatize it. Then they promise not to change anything for today’s seniors, imposing cuts on future retirees. Don’t you believe it. Many of the changes that they want to make right away – such as repealing health care reform – will cut the health benefits and raise out-of-pocket costs for your mother or grandfather now on Medicare.

But here’s the big flaw in their case: Medicare is actually better at controlling costs than the private health insurance industry. You can find the details here. And cost-control experiments pioneered by Medicare – requiring, for example, that hospitals get paid for health care results and not just for every procedure – have the potential to control costs for Medicare and for every other public and private health insurance plan. (You can find the details here. [1])

It is the inefficient and wasteful private health care system that is driving the costs of Medicare. Conservatives fixate on public plans like Medicare because the federal government pays. But if they get their way and turn Medicare into a voucher program, those costs wouldn’t go down; they would just shift and increase, devastating the savings of elderly individuals and their families.

Every other developed country has done a much better job of controlling health care costs without cutting benefits. Economist Dean Baker has repeatedly pointed out that if our system were as efficient as most European countries, America’s private health care costs would flatten out, Medicare costs would stabilize and the long-term federal deficit problem would disappear. Baker’s think tank documents this with new charts here. [2]

Case in Point

♦ Conservatives want to force people in their 60s, 70s and 80s to buy less comprehensive private health insurance with a voucher (a set amount of money each year) the government would give them. Voucher supporters pretend the government would save money because those insurance companies would compete to provide the best coverage at the lowest cost. But insurance companies make their money by finding ways to insure only the healthiest people and avoid the oldest and the sickest. If competition leads to efficiency, why is Medicare far better than private insurance at holding down costs? [3]

♦ The real way these conservative voucher plans would save money for the government is by having the value of the voucher rise more slowly than the cost of health insurance policies. This will shift costs to seniors and their families. Economist David Cutler found [4] the plan supported by Republican presidential candidates Mitt Romney and Paul Ryan plan would raise costs for current seniors by $11,100 and by as much as several hundred thousand dollars for future seniors. This infographic [5] shows how today’s younger workers would fare. Another source is this Kaiser Family Foundation fact sheet [6].

♦ Some conservatives who don’t want to support vouchers instead propose to put a cap on overall Medicare spending. That would mean that seniors end up paying more out of pocket for their care.

♦ Other conservatives want to raise the age when people can get Medicare, which they claim is fair because people are living longer. But that would saddle older adults with big health care bills for months or years longer, at a time when millions of people are hanging on by their fingernails and many unemployed people are going without insurance until they turn 65 and can get Medicare. Raising the eligibility age means that the next wave of (older) seniors to enroll have more health problems due to postponing doctor visits at that advanced age. That means higher Medicare costs, not lower. And research shows [7] the only people living longer these days are the wealthy.

♦ Beyond the bogus arguments about costs, imagine a 75-year-old senior with multiple health problems having to do battle with a private insurance company to get them to pay for hospital care, tests, or even doctor visits. Imagine being older, on a limited income, and needing a lot of health care. Then imagine having to figure out which private policy would allow you to use the doctors you know and trust and meet your health and financial needs, now and in the unforeseeable future. Medicare is better.

Counterpoint

Public Pulse

♦ By a margin of 3 to 1, voters in the swing states of Ohio, Florida and Virginia don’t believe Social Security and Medicare need to be cut to reduce our deficits (The Washington Post-Kaiser Family Foundation [8]).

♦ Given choices for reducing the deficit, including raising taxes on the wealthy and reducing Medicare benefits, 83 percent of Americans oppose cutting Medicare (13 percent supported those cuts) and 68 percent favored raising taxes on households with incomes higher than $250,000 per year (The Washington Post-Bloomberg News [9]).

♦ An August 2012 Pew Poll finds 72 percent of Americans have heard a lot or a little about a proposal to change Medicare into a voucher. And among those who are aware, the idea remains unpopular; by a 49 percent to 34 percent margin, more oppose than favor the idea. This is virtually unchanged from public reactions a little more than a year ago, when Republicans in the House voted in favor of this proposal as part of the “Ryan plan” (Pew Research Center [10]).

♦ A July poll shows the popularity of Medicare among seniors. The poll found that 89 percent of seniors are satisfied with the coverage they currently have through Medicare. (Richard Day Research for Allsup Medicare Advisor [11])

♦ 66 percent of Americans, including 45 percent of Republicans and 64 percent of independents, favor increasing income taxes for upper-income Americans, compared with 42 percent of Americans who support making “significant changes” to Social Security (Gallup [12]).

♦ 66 percent of Americans said they were very worried about “not having enough money for retirement,” making it the issue that the largest number of Americans are concerned about (Gallup [13]).

Tweet This

Don’t cut #Medicare benefits. Make drug cos charge same prices in US as in France or Canada. Deficit will come down. #smarttalk @OurFuture

Americans love #Medicare. Private insurance costs more. Voucherizers = same people who wrecked our economy. #smarttalk via @OurFuture

Tell Congress: Protect #Medicare and health needs of our parents and grandparents, not profits of health insurance and drug companies.

Congress, ignore Wall St. Listen to Main Street. Voucherizing #Medicare will hurt today’s seniors & young people when they need it.

Pew poll: Medicare Voucher Plan Remains Unpopular http://tinyurl.com/ca2lrv2 [14] #smarttalk via @OurFuture

It's the health care prices, stupid. Give #Medicare option to all and health care costs in US will come way down. #smarttalk via @OurFuture

RT Sandra Fluke‏@SandraFluke New study on problems with #Romney's #medicare plan. http://tinyurl.com/8h389bl [15]

Learn More

» Health Care for America Now – Medicare and Medicaid page [16]

» Economic Policy Institute’s Retirement research page [17]

» Center for Economic and Policy Research’s Social Security and retirement issue page [18]

» Fixing our Fiscal Health: Budget Deficits and Health Care Costs [2]